David R. Francis

'Obamacare' tackles health care costs. Will Congress?

The president's health care reform plan includes tools to restrain rising health-care costs, but they may not survive future political battles.

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    President Obama high fives 11-year-old Marcelas Owens after signing into law the Patient Protection and Affordable Care Act, also known as 'Obamacare,' in Washington on Mar. 23. Owens lost his mother to illness before the health care legislation passed. Congressional demagoguery opposing Obamacare may cause cost-limiting measures to be repealed or replaced.
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The United States spends far more on health care than any other nation. Those high costs pinch American consumers, but they're a boon to providers of those medical goods and services.

General practitioners, for example, made about $161,000 a year in 2004, about twice the average among the 30 democracies in the Paris-based Organization for Economic Cooperation and Development. Registered nurses with two years of college make roughly twice what teachers with a four-year degree make. The US spends roughly twice as much on prescription drugs ($572 per person) as the average OECD nation.

That's one reason Uwe Reinhardt, an expert on health-care economics at Princeton University in New Jersey, sounds so gloomy about prospects for reining in medical costs. "Every dollar of health-care spending is someone's health-care income," he notes.

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With so much money sloshing around, the health-care industry has the cash to pay K Street lobbyists "to buy the hearts and minds" of senators and representatives in Congress, he says. To help offset the costs of expanding health insurance to most Americans by 2014, the "Obamacare" law would redeploy $500 billion from Medicare over 10 years, or 6 percent of a total of $3.7 trillion. Professor Reinhardt doubts the provision will survive future partisan battles in Washington.

There are more tools in Obamacare aimed at restraining rising health-care costs. But Reinhardt suspects Washington will "not have the guts to use them," considering the "incredible resistance" from the health-care industry and the politics of such action.

Those opposed to Obamacare, usually Republicans, have likened the Medicare diversion to "killing Granny." The conservative Liberty Counsel calls it a "euthanasia bill." The demagoguery "makes it almost impossible to do anything without having Hitler [and Nazi-style death panels] rubbed in your face," says Reinhardt.

The Obama administration calculates a crackdown on Medicare fraud and fee reductions to private insurance companies providing Medicare Advantage programs will offset the 6 percent cut.

If Republicans and Democrats can't agree on expanding health-insurance coverage, the US will go back to rationing health care by price.

The US spends slightly more than 17 percent of gross domestic product on health care. That's more than $6,000 per capita per year, more than double the OECD average. Without cost restraints, US health-care spending could absorb close to 20 percent of GDP by 2020 and 50 percent by 2050, Reinhardt figures.

Do Americans get their money's worth? Three years ago, the Congressional Research Service concluded that US quality of care is not superior to that of other OECD nations overall and US life expectancy is shorter than average; it's 77.5 years. In Canada, with a single-payer system and half the cost, it is 2.5 years longer.

Under Canada's system, governments negotiate pay with health-care providers. Physicians bill for their service by swiping a plastic card like a credit card, whereas American doctors may employ two or three clerks to bill insurance firms.

If the US returns to the old system, fewer Americans would have health insurance, and insured people would pay more directly from their own pockets. Lower-paid Americans – the gas station attendant, the waitress – would be able to afford only minimal health care. Reinhardt says such a system is unlikely to cut health-care costs.

David R. Francis writes a weekly column.

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